Lilly Ledbetter Fair Pay Act of 2009

Like many of you, we have been inundated recently with news about the Lilly Ledbetter Fair Pay Act of 2009. What is Lilly Ledbetter, and what does it mean for business management?

Signed into law on January 29, 2009, Lilly Ledbetter is an amendment to some of the most fundamental employment law that exists (Civil Rights Act of 1964, Age Discrimination in Employment Act of 1967, Americans with Disabilities Act of 1990, Rehabilitation Act of 1973). In effect, Lilly Ledbetter accomplishes two main purposes:

1.) It extends the period during which employees may file a pay discrimination claim. In the Supreme Court decision for Ledbetter v. Goodyear Tire, the ruling held that employees must file a claim within the statutory period (180 days) following the initial discriminatory pay action. The new law establishes that a discriminatory compensation decision occurs with each paycheck that is lower due to the discriminatory practice or decision. Basically, the employee (or anyone “affected” by the discrimination – possibly children, spouses, etc.) has much longer to file a complaint.

2.) Allows the employee to recover back pay for up to two years prior to the claim in instances where unlawful discrimination is established.

So, now that we have established the main purposes of Lilly Ledbetter, how does it affect your company? Lilly Ledbetter highlights the need for companies to establish why they pay employees particular salaries or wages. There are several ways to do this. A company could simply adopt a tenure-based system, but we all know the inherent downfalls to such a plan.

A better approach is to establish a pay-for-performance system. Such a merit-based system presents logical evidence for why two individuals in the same position may be compensated differently. However, a pay-for-performance system does require managers to do some “heavy lifting” and distinguish between various levels of employee performance. It is imperative that managers keep detailed records of each performance review and assessment. It is also increasingly important that managers are trained (and periodically re-trained) on how to conduct performance reviews, and that they understand how compensation issues relate to the new legislation. This will ensure proper application of the system, as well as consistent performance expectations across the company.

Other items to consider in light of Lilly Ledbetter include:

• Ensuring job descriptions are accurate and up-to-date. If responsibilities have been added to one incumbent’s job, that incumbent needs a new description reflecting this. Also, job descriptions should not unfairly bias one class of employees over another.

• Reviewing the compensation of all incumbents with similar job descriptions/titles/duties. If your company is, in fact, in danger of potential lawsuits, it is much better to be proactive in adopting a plan to correct the situation than to stand idle on the matter.

• Examining the market pay of positions across the company. This will give evidence for why one position may be paid differently from another, although the two may seem to require similar qualifications.

• Conducting a thorough assessment of administrative policies and practices, especially as they relate to pay. In case of legal action, it is imperative to have a trail of evidence to support your company’s claims.

The signing into law of the Lilly Ledbetter Fair Pay Act is sure to have serious implications for companies across the country. As attention grows around such issues, it is vital that your company act appropriately to ensure compliance. While the law causes increased concern for employers in certain areas, it also reinforces the need for sound business practices and presents the opportunity to implement strategic and beneficial changes such as a strong pay-for-performance culture.

What are your thoughts? How will this new legislation impact your organization and the field of human resources? Please leave comments below.